FPM Technical Analysis : GBPUSD 26 February 2020

FPM Technical Analysis : GBP/USD (26 February 2020)

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red). This, along with trendline resistance (2.1161), remains a well-rounded resistance area to keep an eye on long term.

In recent months, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and breaking the 1.3380 March 2019 high.

Currently, the pair trades at -1.57% on the month.

Daily timeframe:

Partially altered outlook from previous analysis –

Demand at 1.2823/1.2910, represents the lower edge of a multi-month range (supply at 1.3303/1.3184 caps upside), continues to contain downside.

Local trendline resistance (1.3514) could make an appearance today, thanks to moves higher yesterday, with a breach portending a move to supply mentioned above at 1.3303/1.3184. Beyond the current demand, another port of demand, a touch larger than the current, resides at 1.2649/1.2799, which happens to house the 200-day SMA.

Meanwhile, in terms of the RSI indicator, since the beginning of the year we have been compressing within a descending channel (black lines), with the value currently holding above channel support and eyeing a test of the upper limit.

H4 timeframe:

Partially altered outlook from previous analysis –

After retesting demand 1.2868/1.2894, the pair recently caught a fresh bid and entered the jaws of supply drawn from 1.3023/1.3006. What’s also appealing here from a technical perspective is a potential AB=CD approach (orange) that terminates around 1.3013.

It may also interest some traders to note that we likely have sellers attempting to fade the recent pullback from 1.2849, due to the 1.3070 double top formation recently confirming (breaking the 1.2872 low, the trough between the two peaks, marked with a blue arrow, offers double-top confirmation). The take-profit target (1.2672) for confirmed double-top patterns can be calculated by taking the distance between the highest peak and the trough and projecting this value south of the trough.

H1 timeframe:

Today’s price action saw the pound firmer against both the US dollar and the euro as the GBP/USD benefitted from some technical tailwinds, crossing 1.30 briefly at the tail-end of trade. 1.30, positioned just south of a supply zone coming in at 1.3043/1.3024, is a widely watched figure in this market. In terms of the RSI, however, we’re seeing the value fade overbought ground.

Direction:

We have H4 price trading from a highly confluent area of supply (AB=CD confluence), and H1 price jostling with the key figure 1.30. A decisive H1 close south of 1.30 could encourage selling, while there’s also a possibility daily price may invite an approach to nearby trendline resistance. As such, we could be in for a test of H1 supply at 1.3043/1.3024 (converges closely with daily trendline) before turning lower. This would likely trip additional buy-stop liquidity.

Irrespective of the entry technique, downside targets reside at H1 demand from 1.2927/1.2942, the top edge of daily demand at 1.2910, followed by the 1.29 handle on the H1.

Disclaimer: The information contained in this material is intended for general advice only.